The local stock market has entered a new multiyear bull cycle that could propel the main stock barometer back to its all-time high level of 9,000 within this year, equities research firm Trading Edge said.
In a recent presentation to investors, Trading Edge chief strategist Ron Albert Acoba said Philippine equities appeared to be heading to the third wave of a five-wave impulse, referring to Elliot Wave analysis which identifies recurring, fractal wave patterns in financial market movements.
“Wave three run up is usually the strongest run up in a five-wave cycle; hence we’re expecting the index to aim for its all-time high of 9,000 following a successful break above 7,500,” Acoba said.
Acoba—a chartered market technician of the Market Technicians Association and a “master of financial technical analysis” under the International Federation of Technical Analysts—said that in the near term, however, the Philippine Stock Exchange index (PSEi) would continue to consolidate as the index was encountering a major resistance at the 7,400 to 7,500 levels.
Breakout after consolidation
However, he said it’s only a matter of time that the PSEi would break out of 7,500 after a period of consolidation and reach 9,000 within this year.
The local market previously peaked at around this level in early 2018. During the hard lockdowns when the COVID-19 pandemic erupted in 2020, however, the index hit as low as 4,778.76 but trimmed its losses during the year.
In 2020, the PSEi declined by 8.64 percent and ended flat in 2021 at 7,122.63. In the last full year prior to the pandemic, in 2019, the PSEi gained 4.7 percent to close at 7,815.26.
Except for the Philippines and Malaysia, Acoba noted that other peer exchange across the Southeast Asian region had now climbed back to prepandemic levels.
But on a longer time scale, he said the PSEi may be at the early stages of a fresh multiyear bull wave.
Previous bull markets lasted for at least five to as long as nine years. The last bull cycle reached nine years due to extremely loose monetary policies across the globe, he said.
In the case of the PSEi, Acoba said its recent pivot off a primary bullish reversal and its ability to mark a series of higher low bases were putting the market in a good position to break its 7,400 to 7,500 resistance levels.
The next interim resistance will be at 8,300—approaching the 2019 high—and will fall in line with the PSEi’s 12-month consensus fundamental target, he said.
“Despite the continued coronavirus-related fears, sentiment has actually improved on a relative basis,” Acoba said.
“The market did not fall below its previous lows with the detection of the new variants. From a technical standpoint, the PSEi has already pivoted off a notable bullish reversal,” he said. INQ